Elevo Watermark remover for heavy watermarks (matagal na/etched na into the glass). For light ones (not so noticeable or medyo sariwa pa), you can use Glass Science
Glass Scrub (And while you're at it, use Rain Clear na rin

).
I've used both the Elevo and the Glass Science combo on our Vios and now it has no watermarks except for dun sa tight corners ng pero very minimal. The Rain Clear too is superb. I've just reapplied it yesterday. Huling gamit ko nun mga December 2009 pa, kahapon lang ulit ako nag-reapply. Ganoon siya katibay.
What cloth? Even the Terry towel will do. Just make sure the glass is completely dry.